In August, bankruptcies exceeded 800 for the first time in 12 years—"labor shortage bankruptcies" have tripled due to soaring labor costs, interpreting Japan's predicament in comparison with overseas.

2025年09月09日 00:21

Number of Cases and Debt Scale
In August 2025, there were 805 corporate bankruptcies nationwide (with debts of 10 million yen or more). This represents an 11.3% increase compared to the same month last year, with a total debt amount of 114.37 billion yen, marking a 12.8% increase. Both figures have surpassed the previous year's for three consecutive months. The number of cases in the 800s is at a high level not seen since 819 cases in August 2013, marking a 12-year high.Tuoi tre newsTSR Network
Characteristics by Scale
There were 612 cases with debts under 100 million yen (comprising 76.0%), and an increase in cases with debts between 100 million and 500 million yen (26 cases, a 73.3% increase from the same month last year), while large-scale bankruptcies are on a declining trend. Overall, small to medium-sized bankruptcies are predominant.TSR Network
Trends by Industry and Region
The service industry had the most cases (242), construction had 175 cases (+44.6%), retail had 94 cases (+18.9%), real estate had 31 cases (+72.2%), and transportation had 34 cases (+36.0%). Regionally, there was an increase in seven areas including Kanto, Chubu, and Kyushu, while Tohoku and Shikoku saw a decrease.TSR Network

The Reality of the Increase
"Labor shortage" related bankruptcies surged from 4 cases last year to 23 cases, with the majority caused by "rising labor costs," expanding approximately threefold.TSR NetworkFacebook
Background Circumstances
The labor shortage due to an aging population has become pronounced, and rising wage levels are squeezing the profits of small and medium-sized enterprises. The normalization of finance, accompanied by interest rate hikes and high prices, is also expanding the damage.Reuters+1

Bankruptcy Cases in Fiscal Year 2024
In fiscal year 2024 (April 2023 to March 2024), the cumulative number of bankruptcies reached 10,144 cases, the highest level in 11 years, marking a 12% increase from the previous year. Bankruptcies related to "labor shortages" and "high prices" were the most numerous, with the number of cases at levels similar to around 13 years ago.nationthailandThe Japan TimesAnadolu Ajansı
Severity by Industry, Focusing on Construction
Construction industry bankruptcies reached 1,924 cases, a high level not seen in 10 years. Rising material and labor costs, along with regulatory overtime limits and labor shortages, have structurally compounded the difficulties.Global Construction Review
The Vicious Cycle of Labor Market Tightness and Bankruptcies
Labor market tightness continues, with labor shortage-induced bankruptcies increasing by 66% (182 cases) in the first half of 2024 compared to the previous year. There are already indications of chain bankruptcy risks among companies, raising concerns about worsening economic cycles.Reuters+1
Relationship with Economic Policies and Central Banks
The Bank of Japan's inflation stimulus measures have tightened the labor market, advancing wage pressures primarily among large corporations. However, for small and medium-sized enterprises, the "burden of labor costs" is heavy, directly contributing to the increase in bankruptcies.Reuters+1

Comparison with Europe, the U.S., and Emerging Countries
In Europe and the U.S., bankruptcies are increasing due to post-pandemic economic downturns, inflation, and rising interest rates. However, "labor shortage bankruptcies" due to declining labor force and aging population, as seen in Japan, are structurally less common, representing a unique challenge.
Differences in Policy Responses
While many countries respond with immigration acceptance and labor market structural reforms, Japan remains cautious about immigration, making it difficult to secure labor supply. Multifaceted approaches such as AI and automation, extending retirement age, and reemployment are required to secure the workforce.
Impact on the Supply Chain
As a unique challenge in Japan, the bankruptcy of small and medium-sized enterprises in rural areas affects the regional economy and the entire supply chain. In contrast, in Europe and the U.S., bankruptcies are often centered on large corporations, leading to differences in the scope of impact and support mechanisms.

Short-term Measures
Policy support for securing loans and working capital, especially strengthening interest subsidies and collateral policies for small and medium-sized enterprises.
Medium- to Long-term Reforms
Promotion of automation and digitalization, securing human resources (utilization of the elderly, women, and foreigners), skills training to improve labor productivity, and strengthening retirement extension and reemployment systems.
Need for Policy Coordination
There is a need for comprehensive advancement of early consultation systems for bankruptcy prevention, funding provision, and employment support through collaboration among the government, local governments, financial institutions, and industry organizations.